Pep Guardiola will have at least £150m to spend on players when he replaces Manuel Pellegrini as the Manchester City manager in the summer. The Spaniard’s salary will also rise to €20m (£15.2m) after it was confirmed he will move to the Etihad following the expiry of his contract with Bayern Munich.

City’s standing as the richest club in the world along with next season’s record Premier League broadcast deal of £5.14bn means Guardiola will be given the backing to enter the market as he wishes in the close season. The club’s finances will be further swelled by the new overseas broadcast deal, expected to be a minimum of €3bn.

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He is a close friend of City’s director of football, Txiki Begiristain, and is expected to consult him regarding transfers before taking over on 1 July.

Guardiola earns €17m at Bayern Munich but this is to increase by €3m in recognition of his standing as one of the world’s most sought after managers. City believed they were close to landing the 45-year-old in 2012 before he decided to take a sabbatical and this strengthened Guardiola’s bargaining position with regard to the three-year contract he signed.

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Pellegrini was informed of the decision last week by Khaldoon al Mubarak, the City chairman, and it is understood the relationship between the two men remains amicable.

The club have no problem with Pellegrini now talking with prospective clubs about where he may manage next. The view is that Chelsea could be interested and given the 62-year-old won the Premier League in his first season with City and wants to remain in English football Stamford Bridge would be of interest.

Guardiola was confirmed as Pellegrini’s successor on Monday when the usually introverted Chilean decided to offer the news in an unsolicited soundbite at the close of his press conference before Tuesday’s visit to Sunderland.

It suggested he may have driven the decision to make Guardiola’s appointment official. Pellegrini said: “Before I finish, I want to tell you I have talked with the club and I will finish my contract on the original date. I signed for one year more [to July 2017], but with the clause that the club or me can choose not to use that stuff now, so I finish here on the original date, 30 June, so there is not the speculation.

“The club are not doing anything behind me, I knew this one month ago, but I don’t think it’s good to have rumour or speculation about these things, so I prefer to finish today, which I why I have told the players and I have told the press. I also spoke to the club two weeks ago and said that I would do it.”

The club then released a statement. “Manchester City can confirm that in recent weeks it has commenced and finalised contractual negotiations with Pep Guardiola to become head coach for the 2016-17 season onwards. The contract is for three years. These negotiations were a re-commencement of discussions that were curtailed in 2012.

“Out of respect for Manuel Pellegrini and the players, the club wishes to make its decision public to remove the unnecessary burden of speculation. Manuel, who is fully supportive of the decision to make this communication, is entirely focused on achieving his targets for the season ahead and retains the respect and commitment of all involved with the leadership of the club.”

Mark Hughes, the Stoke City manager who has also been in charge at City, warned Guardiola the Premier League may be different to La Liga and the Bundesliga.

“I don’t think the news itself is a surprise, maybe the timing of the announcement. It is very interesting,” he said. “The Premier League is unlike any other league in world football. He has been very successful, of course, but he will still need a bit of adaptation.”